Economic Relationship Between U.S and China in Regard to Market of Labor - Research Paper Example

id How the economics interests affects labor market which leads to different economic environment between America and China Introduction This paper emphasizes on the labor market and its affect on different economic environment. In this research paper the effects of labor market on the economy of China and America has been discussed. The influence of economic interests on the labor market has been focused in this paper. The labor market deals with the workers of the country who agrees to sell their working hours for a fixed period of time to an employer. Labors are considered as the factor which can be exploited in the market. The importance of labor market has emerged from the concept of economic scarcity that arises from maximization of utility by the individuals. Discussion Literature review The researchers, Blumstein and Joel in their article have explained the concept of economic interests which affects the labor market and results in different economic environment. The researchers have explained the above stated research question with the concept of sweatshop in which the researchers have mentioned that the value and the demand of the labor in a particular economy increases with the increase in demand of the goods that are produced by the labors (Blumstein and Joel 27-42). The researchers, Carvalho, Makoto and Yukiko, in support of the above researchers have cited an example for explaining the concept. They have explained that the developed countries of the world for example America mainly depends on China for the production and manufacture of its clothes, toys etc since the cost of labor is cheap in China as compared to the cost of labor of America therefore it facilitates America in reducing its cost of production by importing clothes and toys from China. The researchers emphasized that in this situation the economy of both the countries is gaining an advantage. America is reducing its cost of production and China is generating revenue from its export. As a result of increase in demand for toys and clothes of China the demand for workers has increased which has resulted in the increase in wages. Unions are formed in order to safeguard the rights of the labors and they engage the workers in collective bargaining (Carvalho, Makoto and Yukiko 14-35). The researcher Coen-Pirani, in his study paper has focused on the concept of capitalism and conflict of interest prevailing in the economy. The researcher has explained that corporatism is practiced on the concept of free market capitalism. The capital and labor both plays an important and crucial role in the economy. The economic interest of the particular nation is based on the concept of tripartite agreement in which the nation or the state is influenced by the capital and labor. Capitalism is also related with corporatism. The corporatism is considered as the base between the labor and capital. The researcher in his paper has also emphasized that in the economy with favorable and strong corporate arrangement experiences lower rate of unemployment (Coen-Pirani 769-784). In support of the above view the researcher Dix-Carneiro, in his article has discussed this concept related to unemployment with reference to the economy of America and China. America is less dependent on the manufacture of food and beverages on China as a result the level of employment has increased for America since it has engaged its labor towards the production of food and beverages which has decreased the level of employment for China (Dix-Carneiro 825-885) On the contrary the researchers Eaton and Samuel, have focused on the sectoral differences that exist in the economy. China cannot expose its entire sector to America. The sector in which America is more exposed to China has resulted in the loss of employment of its workers in America. Therefore the researcher has mentioned that the American economy is influenced by the economy of China. The US exposure to China has decreased the employment opportunity in the manufacturing sector of the economy. Chinese economy will increase the welfare effect of America in the long run since the decrease in the demand of the American workers in the manufacturing industry will compel them to switch towards other non manufacturing sectors and therefore the welfare gain will enhance in the long run due to labor reallocation (Eaton and Samuel 1741-1779). Findings The findings of this research paper can be analyzed as: It has been observed that the manufacture of the products is distinct for various markets. The market is determined as the sector that is situated in the particular country. The market in each country is specialized in manufacturing of particular products. The firms or the companies in each market are competitive and they experience constant return to scale in terms of its demand for labor. Return to scale technology, materials and other local factors existing in the economy. There is country that imports intermediate goods from the suppliers of the other countries at a lower cost (Helpman and Oleg 1100-1137). On the basis of the labor market scenario and its impact on the economic interest of America and China it has been observed that America imports more than double from China. As a result of which the employment opportunity of America in the manufacturing sector has decreased significantly. The loss of employment in the manufacturing sector is due to the expansion of trade in China which has resulted from either improvement in technology or due to the decrease in the trade cost of China (Layard, Stephen and Richard 35-52) It has been observed that the OECD countries of the world are subjected to achieve higher economic growth and development as compared to the developed countries of the world. The cultural differences that exist in different markets also influence the economy to a large extent. This research paper focuses on the fact that the Gross Domestic Product and the investment capacity of the country also influence the labor market to a large extent (McNally 5-15). The cultural differences and the relationship that exist between the economies of the particular nation also affect the labor market and the economic development of the countries or nations. The research paper also emphasizes on the relationship that is developed between United States and China forms an important base for various economic dealings (Melitz 1695-1725). The developing nations of the world such as China possess strong interest in attracting and generating foreign investment from the developed nation such as America in order to accelerate the economic growth of the nations (Eisenhardt 57-74). It has been observed that American economy is progressing due to the constant support from the Chinese economy. American economy is receiving the favor of importing the manufacturing goods from China. America generally imports from China due to cheap wages for labor. America is able to create high demand for the products that are manufactured in China but sold in America. On the contrary the American economy is also facing challenges since it is able to generate revenue and enjoy the benefit only from those sectors that is exposed to China. The over dependence of America on China has decreased the employment opportunity for America (Menezes, Naercio and Marc-Andreas 17-72). The increase in competition from the Chinese workers has facilitated the workers of America to be reallocated in other sectors of the economy. The share of employment in the sector such as the construction, retail and the wholesale sector will increase (Helpman and Oleg 1100-1137). The extent of competition in China has affected the rate of employment of America. Since the increase in competition results in decreasing the production capacity of America in case of its manufacturing sectors that mainly competes with China. But on the other hand it also facilitates the economy of America to easily access the intermediate goods from China. Therefore the rate of employment of America increases in non manufacturing sectors as compared to the manufacturing sectors (Ossa 35-67). The contribution of the labor market in comparison to the total decrease in the employment opportunity of the manufacturing sectors differs according to the regions and sectors of the economy. The manufacture of computer and electronics products in China has resulted in the decline of the employment opportunity in America as a result of which America has experienced a decline of more than 4.6% in its employment rate (Pierce and Peter 17-32). America experiences a strong competition from China in case of its non manufacturing sectors, since these sectors are not directly exposed to the increase in competition from China. America receives welfare from China both in the short as well as in the long run due to its easy access to the cheaper intermediate goods from China (Turner 32-40). Conclusion This research paper has focused on the fact labor market has influenced both the economy of China as well and America. This research paper focuses on the importance of the labor market that increases the sustainability of the particular nation or the country. America is dependent on China for importing goods related to manufacturing cost in order to reduce its labor wages. Therefore it can be derived from the analysis that labor mobility across the regions plays an important role in influencing the government policies and employment benefit of the nations. Works cited Blumstein, Alfred and Joel Wallman. The crime drop in America.Cambridge University Press, 2006. Print. Carvalho, Vasco, Makoto, Nirei and Yukiko, Saito. Supply Chain Disruptions: Evidence From The Great East Japan Earthquake, Discussion Paper Series, 1(1), pp.14- 35, 2014. Print. Coen-Pirani, Daniele. Understanding Gross Worker Flows Across U.S. States, Journal of Monetary Economics, 57(7), pp. 769-784, 2010. Print. Dix-Carneiro, Rafael. Trade Liberalization and Labor Market Dynamics, Econometrica, 82(3), 825-885, 2014. Print. Eaton, Jonathan and Samuel, Kortum. Technology, Geography, and Trade, Econometrics, 70(5), pp. 1741- 1779, 2002. Print. Eisenhardt, Kathleen.Agency theory: An assessment and review. Academy of management review, 14(1), pp.57-74, 1989. Print. Helpman, Elhanan and Oleg Itskhoki. Labor market rigidities, trade and unemployment. The Review of Economic Studies, 77(3), pp.1100-1137. 2010. Print. Layard, Richard, Stephen, Nickell and Richard Jackman. Unemployment: macroeconomic performance and the labour market. OUP Catalogue. 2005. Print. McNally, Christopher. Chinas Emergent Political Economy: Capitalism in the Dragons Lair, London: Routledge, 2007. Print. Melitz, Marc. The Impact of Trade on Intra-industry Reallocations and Aggregate Industry Productivity, Econometrica, 71(6), pp. 1695-1725, 2003. Print. Menezes-Filho, Naercio, Aquino and Marc-Andreas Muendler. Labor Reallocation in Response to Trade Reform, NBER Working Paper, 1(1), pp.17-72, 2011. Print. Ossa, Ralph. A Quantitative Analysis of Subsidy Competition in the U.S. unpublished manuscript, Chicago: University of Chicago. 2015. Print. Pierce, Justin and Peter, Schott. The Surprisingly Swift Decline of U.S. Manufacturing Employment, NBER Working Paper 18(1). 2012. Print. Turner, Bryan. The body and society. 24(1). Oxford: Blackwell, 1994. Print. Read More